Economy, Finance and Trade in the Middle East and Africa

November 2021

Economies in the Middle East and Africa experienced a downturn in 2020 after continuous expansion since 2015. The COVID-19 pandemic, coupled with slumping oil prices, has disturbed countries’ economic development and distorted public finances. Nevertheless, global recovery over 2021-2025 will boost the region’s hydrocarbon exports and drive economic rebound. Furthermore, economic reforms and growing intra-regional cooperation are set to introduce changes to the region’s economic structure.

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Key Findings

Economic growth is expected to return to pre-pandemic levels

Economic growth in the Middle East and Africa experienced a downturn in 2020 after continuous expansion since 2015. The COVID-19 pandemic has frozen economic development, weakened industrial activity as well as disrupted global supply chains. The COVID-19 shock on the oil sector was especially worrying with many countries in the region relying on hydrocarbon exports. With the pandemic slowly receding thanks to vaccination campaigns in the region, the region’s economy is expected to post a substantial rebound over 2021-2025, driving the economy’s return to normality.

Economic overhaul set to take place in Gulf countries

Economic development in the Gulf countries is expected to be increasingly based on sustainable growth of manufacturing and services sectors, as opposed to a hydrocarbon exports-based model. The ending of the era of internal combustion engine (ICE) vehicles, rising renewables implementation in energy mix around the world are driving economic structure change in the Gulf countries via increasing industrial investments, liberalisation of economies, female empowerment and taxation system amendments.

Intra-region ties intensify

The region’s economies are increasingly seeing benefits of intra-regional cooperation to create a harmonised market. The most notable example of such collaboration is the creation of the African Continental Free Trade Agreement (AfCFTA), which commenced in 2021. The trade bloc is set to facilitate manufacturing investments, intra-regional trade via removal of trade tariffs and single market creation.

Region’s public finances weakened by COVID-19 pandemic

The COVID-19 pandemic introduced a huge economic challenge for countries in the Middle East and Africa in 2020. Countries’ public revenues slumped, while expenditure growth gained pace due to increased health spending and economic revival policies. The state of public finances is set to be haunted by increased debt servicing costs and weak local currencies, which will continue causing recovery sustainability issues.

Introduction

Scope
Key findings

Regional Economic Overview

COVID-19 weakens region’s economic prospects
Oil and gas remains the major economic driver in the region
Large differences in economic development in the region exist
Remittance inflows growth take a hit in 2020
FDI inflows become a major driver of the region’s economies
Inflation in the region to remain the highest globally over 2021-2023
Impact of a 15.0% oil price drop on the Saudi Arabian economy
Impact of C19 Pessimistic1 scenario on the Egyptian economy
Impact of the Eurozone Recession on the UAE’s economy

Regional Trade Profile

Low oil prices weaken region’s current account balances
Exports diversification efforts gain pace
Trade blocs gain importance in exports development

Regional Government Finances

COVID-19 strongly impacts condition of public finances
Fiscal positions and foreign exchange reserves are improving

Country Snapshots

Saudi Arabia: Economic Structure and Foreign Investment Overview
Saudi Arabia: Inflation, Exchange Rates and Export Profile
Iran: Economic Structure and Foreign Investment Overview
Iran: Inflation, Exchange Rates and Export Profile
UAE: Economic Structure and Foreign Investment Overview
UAE: Inflation, Exchange Rates and Export Profile
Nigeria: Economic Structure and Foreign Investment Overview
Nigeria: Inflation, Exchange Rates and Export Profile
Israel: Economic Structure and Foreign Investment Overview
Israel: Inflation, Exchange Rates and Export Profile
South Africa: Economic Structure and Foreign Investment Overview
South Africa: Inflation, Exchange Rates and Export Profile
Egypt: Economic Structure and Foreign Investment Overview
Egypt: Inflation, Exchange Rates and Export Profile
Qatar: Economic Structure and Foreign Investment Overview
Qatar: Inflation, Exchange Rates and Export Profile
Algeria: Economic Structure and Foreign Investment Overview
Algeria: Inflation, Exchange Rates and Export Profile
Kuwait: Economic Structure and Foreign Investment Overview
Kuwait: Inflation, Exchange Rates and Export Profile
Morocco: Economic Structure and Foreign Investment Overview
Morocco: Inflation, Exchange Rates and Export Profile
Kenya: Economic Structure and Foreign Investment Overview
Kenya: Inflation, Exchange Rates and Export Profile
Jordan: Economic Structure and Foreign Investment Overview
Jordan: Inflation, Exchange Rates and Export Profile
Tunisia: Economic Structure and Foreign Investment Overview
Tunisia: Inflation, Exchange Rates and Export Profile
Cameroon: Economic Structure and Foreign Investment Overview
Cameroon: Inflation, Exchange Rates and Export Profile
Bahrain: Economic Structure and Foreign Investment Overview
Bahrain: Inflation, Exchange Rates and Export Profile
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